Token Price Crushing Demand: Why?

Huge mistake I made? Pricing utilities by number of tokens instead of USD.

I went from a pet crate (our utility) costing $10 in tokens to over $3,750 in three weeks due to token price increase.

It was the norm to price utilities by a quantity of tokens instead of the USD equivalent. If a utility costs 50 tokens and the token price doubles, the price (in USD) doubles as well.

A key learning? Pricing in tokens is a quick way to kill demand as you scale.

Instead, consider pricing utilities by USD value instead of token quantities.

Ignoring this means you're pegging utility pricing to an asset that fluctuates in value–the very thing people make buying decisions off of!

What happens if this advice is ignored?

Let's say you have a utility that costs 50 tokens and the price is $1 per token.

The price skyrockets to $10 per token, a 10X!

Did the utility value also grow by the same rate? Does this price some people out of the market? What will this do to demand for the utility? If the price in tokens is changed after, will that piss old holders off?

However, what if that utility were priced based on USD?

The utility now costs $50 (in tokens) and the price per token is $1, or 50 tokens.

Its price skyrockets to $10 per token just like before.

The utility still costs $50 (in tokens), but now it costs them just five tokens instead of 50!

This is "Buying Power" is a great user experience, enables new buyers to get into the project at a predictable value and doesn't price people out of the market.

Below, I'll show you how to execute this, creating a predictable utility value users will go crazy over.

Step #1: Market research.

Begin researching the target market, asking the below questions:

• What do they typically pay to solve this problem?

• How painful is the problem your utilities solve for?

• If they don't solve this problem today, what challenges do they face?

• Why is web3/blockchain a differentiator? How can it increase value and better solve this problem?

Your goal? To understand the current state of the market so you can clearly articulate the pain and arrive at a utility price that makes sense.

Step #2: Speak with the target market.

Don't skip this!

Instead of grabbing the scissors and running down the hall, take some time to speak with your target users:

• Is price too expensive? Too cheap?

• How painful is the problem being solved?

• Do they believe your solution is a better mouse trap? Why?

• What are they using today? What do they like/dislike? How much does it cost?

Don't wait until you're live with a launched project to discover these details. People will offer them willingly as FUD inside your community later 😂.

Side Note: Consider all stakeholders in your ecosystem.

Step #3: Set the utility price in USD.

At this point, we have not only done research on pricing, but also spoken with actual users.

Our pricing? Determined by research and insights from users instead of throwing 💩 at the wall and seeing what sticks.

So, how do we execute?

Start by identifying a reasonable price in USD for a given utility and asking the below:

• Is the value still there for users?

• How about other stakeholders on the network?

• Does price fluctuation still enable a great user experience?

Actual execution?

Your developer will typically utilize a decentralized oracle to check the current token price.

From there, they're able to work out how much the utility should cost (in tokens).

Wrap Up

If this is applicable for your project, learn from my painful mistake.

Having our core utility go from $10 to $3,750 in three weeks dramatically crushed demand (as expected).

When your token price increases, it should be a moment of celebration, not anxiety 😁.

Remember: People buy based on the difference between perceived value and price. Make this gap clear and appealing!

When you’re ready, here’s a few areas I can help you:

• Building a simulation of your entire token economy

• Guiding you on overall project operations, launch and scale

• Identifying gaps in tokenomics, a huge pain point for many

• Learn from my 3,500+ hours of live project operations experience

You can book a free strategy call right here: https://calendly.com/tonydrummond/strategy-call